The DMF ­– or ‘deferred management fee’ – is the exit fee from a retirement village.

The DMF is paid to the village manager when you leave, which is usually when you move into an aged care facility or when you die.

It is usually paid out of the sale price of the unit and is a source of profit for retirement village operators.

The payment is usually a percentage of the fee you pay when you move into a retirement village and is agreed to upfront before you move in.

The percentage calculation is based on how long you lived in the retirement village, the services you used, and the amount of your ongoing contribution.

Retirement village operators use DMF funds to improve or expand village services. The fact that operators have access to the DMF means residents can pay lower recurrent charges during their stay.

Some retirement village operators offer different types of contracts which mean you don’t pay a DMF. For example, some operators offer the ability to pay an up-front management fee and receive all of the sale price when the resident leaves. Others offer pay-as-you-go rent, with no ongoing fee or DMF.

The DMF can sometimes be significant – up to 35% – so it’s important to be prepared and check it before you move in.